Financial industry CEOs earn more as shareholder returns fall

CEOs of financial services companies saw their compensation rise last year by nearly as much as the shareholder returns of their companies fell.

That's according to an analysis this week by ISS Corporate Solutions, which examined the pay reported for chief executive officers on proxy filings between Oct. 1, 2022, and April 18 for 337 S&P 500 companies in all industry sectors. Across all of those companies and industries, median CEO pay rose 3.1% last year, down from the 13.2% increase in 2021.

Among financial services companies, the median growth in CEO compensation was 12.9%, according to ICS. During the year, the median total shareholder return at those companies went down by 16.2%.

“The magnitude of pay increases at financial services companies seem to be greater than those of other S&P 500 companies included in our analysis, particularly driven by large increases in stock and option award values, when granted,” Roy Saliba, managing director at ICS, said in an email. “This stands in contrast to the companies’ stock price performance in the past year, but these awards could have been granted prior to deteriorating market conditions and under the expectations of continued growth, where financial services companies in the S&P 500 had enjoyed a median [total shareholder return] of 32.9% covering the prior reporting period.”

While financial services CEO salaries were mostly flat year over year, stock awards increased by nearly 24%, and options awards were up about 22%. Median bonuses and annual incentive payouts were down by 8.5%, ICS found.

Those adjustments brought the median pay for CEOs in financial services to $17.9 million, up from $14.5 million in 2021. Meanwhile, the median total compensation for CEOs of the S&P 500 companies in the analysis was $14.3 million last year.

COMPANY RESULTS

The biggest increases in pay among financial services companies as a percentage of the prior year’s total compensation occurred at American Express, S&P Global, Franklin Resources, Synchrony Financial, Capital One, Raymond James, State Street and MSCI, according to data from ICS.

American Express CEO Stephen Squeri was the highest-paid financial services CEO in the analysis, with total compensation of more than $48 million last year, up 88% from $25.5 million in 2021. S&P Global CEO Douglas Peterson’s compensation increased 77%, while Franklin CEO Jennifer Johnson’s pay went up by 60%. Among those three companies, total shareholder returns fell by 8.5%, 28.4% and 24.3%, respectively.

At Raymond James, where total shareholder return increased by 8.2% year over year, CEO Paul Reilly’s compensation increased by 29.9%, from $13.9 million to $18.1 million, according to ICS figures.

State Street CEO Ron O’Hanley’s compensation last year was $18 million, up 27.6% from $14.1 million, as total shareholder return fell by 13.7%.

Morgan Stanley CEO James Gorman saw his pay increase by 12.8%, going from $34.9 million to $39.4 million, as total shareholder return fell by 10.4%. Charles Schwab CEO Walt Bettinger’s pay increased by 11.1%, at $24.4 million compared to $21.9 million, with total shareholder returns up slightly, at just under 0.1%.

The biggest pay cut was seen by Goldman Sachs CEO David Solomon, who took in $31.6 million, down 20% from $39.5 million, as the company's total shareholder return declined by 7.9%.

WIDER INDUSTRIES

Across the 25 industries that ICS examined, 16 saw increases in median pay for CEOs, while there were decreases in the other nine. Median total shareholder return was positive within five industries but negative for the other 20.

Although total shareholder returns generally declined, they decreased by smaller rates overall at the companies where CEO pay increased. At companies where CEO pay went up, the median amount of compensation increased by 11.5% — at those companies, total shareholder return declined by 8.4%, according to ICS. Among companies where CEO pay went down, the median decrease was 12.8%, but total median shareholder return was 12% lower.

An exception was the energy sector, where median compensation decreased by 0.8%, but total shareholder return was up more than 71%. Within the auto industry, CEO pay went up 1.5%, but total shareholder returns were down nearly 43%.

“This underscores a disconnect between CEO pay and short-term share performance across a number of industries where companies’ 1-year median [total shareholder return] declined by double digits while CEO pay concurrently increased by double digits,” ICS noted in its analysis. “These industries include banks, financial services, technology hardware and equipment and equity real estate investment trusts.”

TRENDING UPWARD

CEO pay increases are occurring even more companies find themselves failing on so-called “say-on-pay” votes by shareholders, according to reports from As You Sow. While average worker pay has remained mostly flat over the past 40 years, adjusted for inflation, CEO compensation has rocketed. Among the largest U.S. companies, the average CEO is paid 324 times what the average worker at the same company earns, up from a ratio of about 60-to-one in the 1970s, former Labor Secretary Robert Reich said during a presentation earlier this year.

“Last year we saw say-on-pay vote support continue its downward trend over the last several years, combined with a record number of say-on-pay failures at S&P 500 companies broadly, but that does not seem to have had an effect on CEO pay as it continued to increase,” ICS’s Saliba said. “Say-on-pay resolutions continue to be a way for shareholders to express their dissatisfaction with executive pay … [but] it is unclear that say-on-pay resolutions have impacted the magnitude of executive compensation at a broad scale, which continues to increase year over year.”